The emergence of the origination function within Private Equity Funds.

Whilst one or two local Private Equity funds were early adopters in establishing internal origination functions - Crescent and Pemba (previously RMB capital) - spring to mind, it’s really only recently that we’ve seen a marked increase in other managers looking to follow suit.

Different firms have chosen to tackle the origination puzzle in different ways. Some adopted a purer BD, go-to-market sales style solution. Some invested in bolstering their data analytics or CRM systems to better support investment team origination capability and focus. Others - and probably the most common - are choosing a blend of the two, ensuring they embed a layer of financial capability in the external facing members of an origination team to better assist with initial screening and quality control alongside their business development KPIs.

Australia seems to be headed in the same direction as the US market where funds have fully embraced and subsequently fine-tuned their origination functions to the degree that they now sit proudly alongside the investment and portfolio teams alike. As we have seen in the US, this function now offers a long-term career pathway with promotional opportunities including MD or potentially Partner - with the accompanying financial rewards for those who can point to making a material difference in helping put capital to work.

To date, it is the mid-market and earlier stage growth funds that have been the early adopters here in Australia.  However, and in line with the US, we are likely to see larger funds with multiple pools of capital to deploy follow suit. Currently, there is at least one global manager JMES are aware of who are looking to trial this in Australia with a view to rolling it out internationally once it has been road tested down under.

In order to promote and facilitate it’s development, JMES have agreed to create a “VIP Lounge“ club for those that sit in origination roles either within the funds themselves and/or those that service the funds community in relation to potential investments (CA firms/investment banks/advisory firms etc) . So if you belong to either of these groups and would like to be connected to other members of this growing community, please reach out to us to join what might just be the newest, coolest club in town. Enquiries re: membership to Jon Michel jmichel@jmes.com.au and/or Ali Roger aroger@jmes.com.au